Ministers announced financial schemes introduced to support local businesses during the pandemic days before formally approving them, the latest review from the Government’s spending watchdog has revealed.
Comptroller and Auditor General (C&AG) Lynn Pamment released her latest reports in a series analysing how the pandemic was handled, this morning.
Her fifth and six reports focused on five of the schemes introduced by the Government to support businesses during the pandemic: the Co-Funded Payroll Scheme (CFPS), the Business Disruption Loan Guarantee Scheme (BDLGS), the Visitor Accommodation Support Scheme (VASS), the Fixed Costs Support Scheme (FCSS) and the Visitor Attractions and Events Scheme (VAES).
Pictured: The Comptroller and Auditor General (C&AG), Lynn Pamment, has been reviewing the Government's response to the pandemic.
During her review, Ms Pamment found that the schemes had been developed “at pace with appropriate consideration to risk”. “The Government moved quickly to develop and implement a suite of schemes to support the business sector,” she wrote. “Businesses have used the schemes for support during the COVID-19 pandemic although, for some schemes, not to the degree anticipated when the schemes were introduced.”
While she said it was too early to conclude whether the schemes had been successful in meeting their “intended objective”, the C&AG raised issues with the way they had been announced, and the lack of audit on the claims.
Pictured: The C&AG said some of the schemes had been announced before they had been formally approved.
Ms Pamment noted that in some cases, the schemes had been announced to the public before the business case for the scheme had been drawn up and a formal Ministerial Decision approved.
She added that when the public was told about some of the schemes, the status of the announcement and related Ministerial Decision had not always been clear.
In the case of the CFPS, which received the greatest volume of claims and provided the largest value of support, £133.5 million, Ms Pamment said that minutes from the Competent Authorities Ministers showed that it was announced while it was still under development and all the details had not been finalised.
While the public announcement on 20 March 2020 indicated it would last for six weeks, the scheme approved by the Ministerial Decision on 1 April was only applied for 12 days.
The BLGS was also announced in advance of the formal Ministerial Decision. “There is a risk that the early announcement limited scrutiny, debate and consideration of alternative measures,” Ms Pamment wrote. “The early announcement may also have raised expectations in relation to the amount and speed of guarantees before a Ministerial Decision was formally approved.
Pictured: Some of the schemes were extended without Ministerial Decision approving the extension.
In addition, Ms Pamment revealed that no ministerial decision had been made to support the extension of the VASS, FCSS and VAESS. While she noted that, given the extension was not expected to exceed the original budget the decision to extend did not require a ministerial decision, she said it would have prudent to record one “to document the rationale for each of the extensions given that they are a matter of public interest, and in that regard could be considered as ‘significant’”.
“I consider however that a decision to extend a scheme is a separate and different decision to a decision to introduce a scheme with a fixed end date and a fixed funding allocation,” she wrote.
Lobbying for changes
The C&AG also raised issues with the absence of “open and transparent mechanism” for consultation with businesses on each of the CFPS phases and that some of the changes had been introduced as a result of “successful lobbying by businesses and sectors”.
“Whilst there is evidence that the Government consulted with sector representative organisations on the Phase Two scheme, the input requested and received was not part of a formal, structured, open and transparent consultation exercise,” she wrote.
“The lack of a formal, structured, open and transparent consultation exercise risks enabling some industries to lobby harder than others for beneficial changes to a scheme.”
Pictured: The Government still has to start auditing the claims made under the various schemes.
The Government watchdog noted in her report that checks on the payments made had “lagged behind payment dates” and that the Government might struggle to recover any money unduly claimed as a result.
She said the process was only just starting or had yet to take place for VASS and FCSS, which respectively provided £6.34 and £3.14 million in support.
“It is important for Government to complete its planned post payment audit checks as soon as possible in order to recover any monies claimed fraudulently or in error,” she wrote.
“There remains a risk that errors and fraudulent payments are yet to be identified and that, if they are, it could be more difficult to recover monies due to the time lag since payment. It is also important for Government to undertake formal evaluations as the schemes end to assess the effectiveness of the individual schemes in meeting their planned objectives."
In the case of the CFPS, Ms Pamment said the checks had so far focussed on checking the correct reduction in turnover.
In total, £5.32million of overclaims were identified by an independent audit firm at 25 July 2021, representing 6.6% of the payments made to 31 August 2020. This included overclaims from organisations that voluntarily requested to make a repayment when they were notified of an audit. As of 25 July, £3.74 million had been recovered with some organisations repaying by instalment.
Pictured: Social security contributions and the claims made under CFPS still haven't been reconciled.
However, no arrangements have been made to check that all the employees claimed for have been paid by the organisations making the claim.
She said the reconciliation of employee data on the CFPS system to Social Security contribution schedules had been planned to take place at the end of the scheme in October 2021.
It was initially planned to test 5% of the claims to prove that staff received the salaries indicated in the calculations. 600 employees were contacted in May 2020 about their employment status and payments, no overclaims were identified but the sample testing was discontinued because it was “too labour intensive”
She said the risk of error and fraud would have been better managed by undertaking the “appropriate reconciliations earlier and whilst the CFPS was ongoing” and said the Government should prioritise this work “as soon as possible”.
She previously highlighted how Government was trying to recover over £75,000 in claims made under the CRESS scheme, which introduced in April 2020 to support those who had lost their job because of the pandemic, and had been in the island for fewer than five years.
What has the Government said?
Pictured: The Minister for Economic Development, Tourism, Sport and Culture, Senator Lyndon Farnham, said the Government will consider what they can learn from the report’s findings.
The Government welcomed Ms Pamment’s reports. The Minister for Economic Development, Tourism, Sport and Culture, Senator Lyndon Farnham, said they will consider what they can learn from the report’s findings, and will continue to work with the C&AG in assessing the Government’s response to Covid-19.
“When developing these schemes, we prepared for worst-case scenarios, and it’s good news that they were accessed by fewer businesses than we anticipated," he added. "The worst-case scenario was largely avoided because of the way in which Government, the businesses community and islanders more generally responded to the pandemic. For some sectors, which are still affected, Government support will continue to help them to continue trading until spring of 2022, and the return to safe normality.”
The Minister for Treasury and Resources, Deputy Susie Pinel, said it was right for the schemes to have been reviewed, and that she was pleased with the conclusions made.
“These schemes represent a significant investment by Government and contributed to the continuity of hundreds of businesses and thousands of jobs in Jersey," she added. "With the Co-Funded Payroll Scheme, some 16,481 employees received payments through claims made by 3,649 businesses at its peak in April 2020."
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